UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.  20549 Form 10-QSB (Mark One) xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period endedDecember 31, 2005 [
        ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from __________ to __________ Commission file number000-30299 GLOBAL INNOVATIVE SYSTEMS INC.(Exact name of small business issuer as specified in its charter)  Nevada
        
        98-0217653(State or other jurisdiction of incorporation or organization)
        
        (IRS Employer Identification No.)  16/F., Hang Seng Mongkok Building, 677 Nathan Road, Mongkok, Kowloon, Hong Kong(Address of principal executive offices)  (852) 2546-1808(Issuers telephone number)  N/A(Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     YesxNo [   ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 19,929,489 common shares issued and outstanding as of February 5, 2006. Transitional Small Business Disclosure Format (Check one):
        Yes [
        ]
        Nox Indicate by check mark whether the registrant is a shell company (as defined in Rule 2b-2 of the Exchange Act). Yes [
        ]
        Nox        GLOBAL INNOVATIVE SYSTEMS INC. PART I - FINANCIAL INFORMATION Item1.Financial Statements.  Condensed Unaudited Consolidated Balance Sheets as at December 31, 2005 and March 31, 2005 (Audited)  Condensed Unaudited Consolidated Statements of Operations for the three and nine months ended December 31, 2005 and 2004  Condensed Unaudited Consolidated Statements of Cash Flows for the nine months ended December 31, 2005 and 2004  Notes to Unaudited Condensed Consolidated Financial Statements  Item 2. Managements Discussion and Analysis.  Item 3. Controls and Procedures.  PART II - OTHER INFORMATION  Item 1. Legal Proceedings.  Item 6. Exhibits.        Item 1. Financial Statements.     GLOBAL INNOVATIVE SYSTEMS INC. INTERIM CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2005 UNAUDITED        GLOBAL INNOVATIVE SYSTEMS INC.  CONDENSED CONSOLIDATED BALANCE SHEETS
Expressed in US dollars  December 31,
        March 31,2005
        2005(Unaudited)
        (Audited)$
        $ASSETSCurrent assets:Cash and cash equivalents
        63,153
        32,694Restricted deposits
        222,576
        220,253Investments  restricted
        671,802
        -Deposit paid on acquisition of Beijing Illumination (Hong Kong) Limited
        1,928,020
        -Trade receivables, net of allowance for doubtful accountsof $nil on December 31, 2005 and $nil on March 31, 2005
        1,572,809
        1,819,808Net investment in sales-type leases
        168,750
        148,478Prepaid expenses and other current assets
        862,644
        153,956Amount due from a shareholder
        75,653
        -Amount due from a related company
        15,501
        15,501Inventories
        643,073
        94,004Total current assets
        6,223,981
        2,484,694Intangible assets
        3,378,612
        3,750,476Investments  restricted
        -
        670,184Equipment, net
        326,766
        332,798Net investment in sales-type leases
        546,198
        552,5184,251,576
        5,305,976Total assets
        10,475,557
        7,790,670LIABILITIES ANDSHAREHOLDERS' EQUITYCurrent liabilities:Short-term borrowings
        1,268,629
        1,323,086Current portion of long-term debts
        7,391
        119,551Trade payables
        1,217,947
        826,187Amounts due to directors
        3,267,922
        1,210,006Amounts due to shareholders
        64,420
        167,850Accrued expenses and other current liabilities
        464,442
        545,456Current portion of obligations under capital leases
        9,674
        61,199Income tax payable
        263,502
        136,246Total current liabilities
        6,563,927
        4,389,581Non-current liabilities:Obligations under capital leases
        1,974
        2,468Total non-current liabilities
        1,974
        2,468Total liabilities
        6,565,901
        4,392,049Minority interest
        364
        364       - 5 -   GLOBAL INNOVATIVE SYSTEMS INC.  CONDENSED CONSOLIDATED BALANCE SHEETS  (continued)
Expressed in US dollars  December 31,
        March 31,2005
        2005(Unaudited)
        (Audited)$
        $Shareholders' equity:Common stockAuthorized:800,000,000 common shares, par value $0.001 per share100,000,000 preferred shares, par value $0.001 per shareIssued and outstanding:19,929,489 common shares at December 31, 2005 and19,033,096 common shares at March 31, 2005
        19,929
        19,033Common stock warrants
        573,692
        -Additional paid-in capital
        6,723,320
        5,977,080Accumulated other comprehensive loss
        (42,992)
        (44,609)Accumulated deficit
        (3,364,657)
        (2,553,247)Total shareholders' equity
        3,909,292
        3,398,257TOTAL LIABILITIES ANDSHAREHOLDERS' EQUITY
        10,475,557
        7,790,670  See notes to condensed consolidated financial statements.      - 6 -   GLOBAL INNOVATIVE SYSTEMS INC.  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Expressed in US dollars  Three Months Ended
December 31,
        Nine Months Ended
December 31,2005
        2004
        2005
        2004$
        $
        $
        $Revenues:Hardware
        1,510,307
        171,318
        2,307,840
        673,286Rental income
        1,404
        964
        3,332
        2,892Commission and service income
        21,525
        141,277
        836,883
        181,837Sales-type lease income
        4,263
        3,780
        13,350
        6,323Total net revenues
        1,537,499
        317,339
        3,161,405
        864,338Cost of revenues:Hardware
        (1,232,556)
        (39,104)
        (1,849,887)
        (240,512)Rental
        (803)
        (473)
        (1,750)
        (1,421)Commission and service
        (826)
        (6,424)
        (21,132)
        (11,873)Total cost of revenues
        (1,234,185)
        (46,001)
        (1,872,769)
        (253,806)Gross profit
        303,314
        271,338
        1,288,636
        610,532Amortization of intangible assets
        (123,406)
        -
        (371,864)
        -Selling and marketing expenses
        (133,481)
        (162,770)
        (462,719)
        (333,590)General and administrative expenses
        (298,970)
        (123,321)
        (1,054,508)
        (569,448)Loss from operations
        (252,543)
        (14,753)
        (600,455)
        (292,506)Interest expense
        (39,024)
        (42,086)
        (99,831)
        (106,041)Interest income
        4,212
        16,093
        16,127
        16,093Other income
        (1)
        (9,274)
        4
        4,813Loss before income tax and minority interests
        (287,356)
        (50,020)
        (684,155)
        (377,641)Minority interests
        -
        -
        -
        -Income tax
        -
        -
        (127,255)
        -Net loss
        (287,356)
        (50,020)
        (811,410)
        (377,641)Basic and diluted loss per share
        (0.01)
        (0.01)
        (0.04)
        (0.05)Weighted average number of commonshares outstanding, basic and diluted
        19,929,489
        7,291,462
        19,735,708
        7,291,462  See notes to condensed consolidated financial statements.          - 7 -   GLOBAL INNOVATIVE SYSTEMS INC.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Expressed in US dollars  Nine Months Ended
December 31,2005
        2004$
        $Cash flows from operating activities:Net loss
        (811,410)
        (377,641)Adjustment to reconcile net income / (loss) tonet cash used in operating activities:Amortization of intangible assets
        371,864
        -Depreciation expense
        64,071
        58,775Write-off of equipment
        5,227
        -Write-off of inventories
        -
        8,188Changes in operating assets and liabilities:Trade receivables
        246,999
        (146,149)Net investment in sales-type leases
        (13,952)
        (498,108)Prepaid expenses and other current assets
        (708,688)
        (8,302)Inventories
        (549,069)
        (95,185)Trade payables
        391,760
        18,181Amount due from related company
        -
        (8,980)Accrued expenses and other current liabilities
        (81,014)
        83,146Income tax payable
        127,256
        -Net cash used in operating activities
        (956,956)
        (966,075)Cash flows from investing activities:Purchase of fixed assets
        (63,267)
        (2,135)Increase in restricted deposits
        (2,323)
        (39)Cash used in investing activities
        (65,590)
        (2,174)       - 8 -   GLOBAL INNOVATIVE SYSTEMS INC.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)
Expressed in US dollars  Nine Months Ended
December 31,2005
        2004$
        $Cash flows from financing activities:Repayment of short-term borrowings andlong-term debts
        (166,617)
        (551,442)Repayment of capital lease obligations
        (52,019)
        (58,884)Gross proceeds from issuance of share capital and common stock warrants
        1,344,589
        -Expenses incurred for issuance of share capital and common stock warrants
        (23,761)
        -Advance from shareholders
        25,853
        -Advance to a shareholder
        (75,653)
        -Repayment to shareholders
        (129,283)
        -Advance from a director
        1,303,558
        2,397,345Repayment to a director
        (1,173,662)
        (746,679)Net cash provided by financing activities
        1,053,005
        1,040,340Net increase in cash and cash equivalents
        30,459
        72,091Cash and cash equivalents at beginning of the period
        32,694
        3,078Cash and cash equivalents at end of the period
        63,153
        75,169Other non-cash itemsDeposit paid on acquisition of Beijing Illumination (Hong Kong) Limited
        (1,928,020)
        -Payment of deposit by director
        1,928,020
        -  See notes to condensed consolidated financial statements.      - 9 -   GLOBAL INNOVATIVE SYSTEMS INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the THREE AND NINE MONTHS ended DECEMBER 31, 2005 (Unaudited)  NOTE 1.  NATURE OF OPERATIONS AND BASIS OF PRESENTATION  Global Innovative Systems Inc., (the "Parent") and its subsidiaries (collectively referred to as the "Company") is principally engaged as a developer, manufacturer and integrator of energy saving products and technologies and the provision of consulting and customer training services.  In addition, the Company also acts as an agent to market gasoline products on behalf of petroleum distributing companies.  The accompanying unaudited condensed consolidated financial statements are stated in United States dollars and have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and pursuant to the rules of the Securities and Exchange Commission.  Accordingly, certain information and disclosures, normally included in annual financial statements, have been condensed or omitted pursuant to those rules and regulations.  In the opinion of the management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly present the financial position, results of operations and cash flows with respect to the interim consolidated financial statements have been included.  The results from operations for the three and nine months ended December 31, 2005 are not necessarily indicative of the results for the entire fiscal year.  The management recommends that these unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated March 31, 2005 financial statements and notes thereto of the Company and its subsidiaries included in its annual report on Form 10-KSB filed on July 18, 2005.  The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As shown in the condensed consolidated financial statements, the Company has a net working capital deficit of $339,946 as of December 31, 2005 and used cash in its operations of $956,956 during the nine months ended December 31, 2005. The continuation of the Company is dependent upon the continuing financial support of its directors and shareholders, and obtaining long-term financing, as well as achieving and maintaining a profitable level of operations through successful product development and sales.  These factors, among others, indicate that the Company may be unable to continue as a going concern. The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  Management recognizes that the Companys continuation as a going concern is dependent upon its ability to generate sufficient cash flow to allow the Company to satisfy its obligations on a timely basis.  The Company commenced a discussion which included negotiating credit arrangements with certain bankers, raising new equity financing sufficient to retire all outstanding liabilities and to fund the restructuring.  Upon successful completion of the discussion, management has determined the Company will be better positioned to fund its current obligations and obtain new financing.  While the Company is expending its best efforts to achieve the restructuring and new acquisitions, there is no assurance that any such activity will be successful and will generate funds necessary for continued operation of the Company.  NOTE 2.  SUMMARY OF PRINCIPAL ACCOUNTING POLICIES  Basis of Presentation  The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.  Principle of Consolidation  The consolidated financial statements include the financial statements of the Company and its majority-owned subsidiaries.  All significant intercompany transactions and balances are eliminated on consolidation.      - 10 -   Use of Estimates  The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period.  Actual results could differ from those estimates.  Revenue Recognition  The Company recognizes revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, the product has been delivered and installed or the services have been provided to the customer, the sales price is fixed or determinable, and collectibility is reasonably assured.  In addition to the aforementioned general policy, the following are specific revenue recognition policies for each major category of revenue.  Hardware- The Company sells its products directly to end users with installation ("Direct Sales Contracts") and through distributors ("Trading Contracts").  Direct Sales Contracts revenue from hardware sales or sales-type leases is recognized when the product is delivered to the customer and related installation is completed when there are no unfulfilled company obligations that affect the customer's final acceptance of the arrangement and when all other revenue recognition criteria are met.  Revenue from Trading Contracts is recognized when the product is delivered and title transferred and when all other revenue recognition criteria are met.  Revenue from rentals and operating leases without any acceptance provisions is recognized on a straight-line basis over the term of the rental or lease.  There is no right of return for hardware sold (except for quality).  The warranty
expense is not significant as the warranty is provided by the suppliers.  Commission and Services Income:  -
        Revenue from consultancy services related to energy - saving feasibility study is recognized when granted.  Services are considered granted when the Company delivers its assessment to its customer and the customer signs the acceptance report.  -
        Commissions earned from customer marketing services, where the Company is acting as an agent for petroleum distribution companies, are recorded upon notification by the petroleum distribution companies for the amount earned, which is based on a pre-determined amount, per unit of gasoline sold to referred customers.  -
        Commissions earned from the referral and assignments of sales contracts are recorded when the rights and obligations for the liabilities under the sales contracts are transferred and legally assured by the transferee.  Sales-type lease income- Represents finance income attributable to sales-type leases and is recognized over the term of the lease, using the effective interest method.  Trade Receivables and Allowance for Doubtful Accounts  In regards to the Companys allowance for doubtful accounts, the Company periodically records a provision for doubtful accounts based on an evaluation of the collectibility of accounts receivable by assessing, among other factors, the customers willingness or ability to pay, repayment history, general economic conditions, and the ongoing relationship with the Company's customers.  The total amount of this provision is determined by first identifying the receivables of customers that are considered to be a higher credit risk based on their current overdue accounts, difficulties in collecting from these customers in the past and their overall financial condition.  For each of these customers, the Company estimates the extent to which the customer will be able to meet its financial obligations, and the Company records an allowance that reduces its accounts receivable for that customer to the amount
that is reasonably believed will be collected.  Additional allowances may be required in the future if the financial condition of the Company's customers or general economic conditions deteriorate, thereby reducing net income.       - 11 -   Valuation of Inventories  Inventories are stated at the lower of cost or market value. Cost is determined on the first-in, first-out basis. Write-down of potentially obsolete or slow-moving inventory is recorded based on managements analysis of inventory levels and the Company's assessment of estimated obsolescence based upon assumptions about future demand and market conditions. Further write-down of the value may be required in the future if there is rapid technological and structural change in the industry. This may reduce the results of operations of the Company.  Foreign Currency Translation  The functional currency of the Company is in HKD. Transactions in other currencies are recorded in HKD at the rates of exchange prevailing when the transactions occur. Monetary assets and liabilities denominated in other currencies are measured in HKD at rates of exchange in effect at the balance sheet dates. Exchange gains and losses are recorded in the condensed consolidated statements of operations as a component of current period earnings.  Impairment of Long-Lived Assets  The Company reviews long-lived assets for potential impairment based on a review of projected undiscounted cash flows associated with these assets.  Long-lived assets are included in impairment evaluations when events and circumstances exist that indicate the carrying amount of these assets may not be recoverable.  Measurement of impairment losses for long-lived assets that the Company expects to hold and use is based on the estimated fair value of the assets.  Therefore, future changes in the Company's strategy and other changes in its operations could impact the projected future operating results that are inherent in estimates of fair value, resulting in impairments in the future.  Additionally, other changes in the estimates and assumptions, including the discount rate and expected long-term growth rate, which drive the valuation techniques employed to estimate the fair value of long-lived assets could
change and, therefore, impact the assessments of impairment in the future.  Intangible Assets  Our Company acquired certain intangible assets through the acquisition of Tomi Fuji Energy Management Services Consultants Limited in January 2005.  These intangible assets are comprised of trademarks, customer lists and relationships, and unfulfilled purchase orders.  The acquired trademark was determined to have an indefinite useful life which is not subject to amortization, unless and until its useful life is determined no longer to be indefinite.  Our Company tests for impairment of trademarks annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.  The customer lists and relationships and unfulfilled purchase orders are subject to amortization for five years and five months, respectively, and reviewed for impairment if the carrying amount of the customer base is not recoverable and its carrying amount exceeds its fair market value.  After an impairment
loss is recognized, the adjusted carrying amount of the intangible asset shall be its new accounting basis.  The estimation of the useful life of the trademark, customer lists and relationships will be affected by factors such as change in demand, unanticipated competition and other economic factors including stability of industry, change in technology, legislative action that results in an uncertain or an adverse change in the regulatory environment and changes in distribution channels and business climate.  If impairment loss is recognized, the results of operations and the financial condition of the Company will be adversely affected.  Investments  The Company classifies investments in mutual funds as available-for-sale securities and carries them at market value. The unrealized holding gains and losses on these securities are excluded from earnings and are reported as a separate component of other comprehensive income or loss until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification basis and are reflected in consolidated statement of operations.  The Company assesses declines in the value of individual investments to determine whether such decline is other-than-temporary and thus the investment is impaired. This assessment is made by considering available evidence including changes in general market conditions, specific industry and individual company data in which the guaranteed mutual funds are invested in, the length of time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the individual company in which the guaranteed mutual funds are invested in, and the Companys intent and ability to hold the investment.      - 12 -    Net Investment in Sales  Type Leases  At the time a sales  type lease is consummated, the Company records the gross finance receivable, less unearned income.  Unearned income is recognized as lease income using the interest method over the term of the lease and is included as financing revenue in the Company's consolidated statements of operation.  The Company reviews minimum lease payments receivable considered at risk on a periodic basis.  The review primarily consists of an analysis based upon current information available about the client as well as the current economic environment, value of leased assets net of repossession cost and prior history.  Impairment is measured using the fair value of the leased assets when foreclosure is probable.  Using this information, the Company determines the expected cash flow for the receivable and calculates a recommended estimate of the potential loss and the probability of loss.  For those accounts
in which the loss is probable, the Company records a specific reserve.  Concentration of Credit Risk  Commission income was earned by Tomi Fuji Energy Management Services Consultants Limited ("Tomi Fuji EMS"), the Company's wholly-owned subsidiary, from an assignment of an energy saving consultancy project by Tomi Fuji EMS to a third party.  This commission income represents 25% of the Companys total revenue for the nine months ended December 31, 2005. There was also a sale transaction made to a third party representing 44% of the Companys total revenue for the nine months ended December 31, 2005.  The Company relies on supplies from numerous vendors. For the nine month period ended December 31, 2005, the Company had one vendor that accounted for more than 82% of total supply purchases for the period.  If the vendor terminates its relationship with the Company or if the Companys supply from a vendor is interrupted or terminated for any reason, the Company may not have sufficient time to replace the supply of products from the remaining vendors.  Any such interruption would negatively impact the Company's ability to sell and distribute its products.  The Companys business, assets and operations is currently focused on the sale of electrical energy-saving products in China, and accordingly, is affected to a significant degree by any economic, political and legal developments in China.  Earnings (Loss) Per Share  Basic earnings / (loss) per share ("EPS") is based on the weighted average number of shares of common stock outstanding for the period.  Diluted EPS is based on the weighted average number of common shares outstanding and dilutive common stock equivalents, such as the potential exercise of outstanding warrants.  The effects of warrants have not been included in the 2005 and 2004 EPS computation as their effect would have been anti-dilutive.  Recent Accounting Pronouncements  In May 2005, The Financial Accounting Standards Board (the "FASB") issued FASB Statement No. 154, "Accounting Changes and Error Corrections  a replacement of APB Opinion No. 20 and FASB Statement No. 3" ("FAS 154").  FAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle.  The provisions of FAS 154 requires, unless impracticable, retrospective application to prior periods financial statements of (1) all voluntary changes in principles and (2) changes required by a new accounting pronouncement, if a specific transition is not provided.  FAS 154 also requires that a change in depreciation, amortization, or depletion method for long-lived, non-financial assets be accounted for as a change in accounting estimate, which requires prospective application of the new method.  FAS 154 is effective for all accounting changes made in fiscal years beginning
after December 15, 2005.  The Company expects that the adoption of FAS 154 will not have a material effect on the financial position of the Company.  NOTE 3.  NET INVESTMENT IN SALES-TYPE LEASES  Net investment in sales-type leases is for leases that relate to the Company's hardware sales and are generally for terms ranging from two to five years.  Interest rates range from 2.5% to 5% and the leases are secured by the respective leased assets.      - 13 -   The details of net investment in sales-type leases are as follows:  December 31,
2005
$
        
        March 31,
2005
$Total minimum lease payments to be received
        755,514
        
        746,653Less: Unearned income
        (40,566)
        
        (45,657)Net investment in sales-type leases
        714,948
        
        700,996Current portion
        (168,750)
        
        (148,478)Net investment in sales-type leases, less current portion
        546,198
        
        552,518  Contracted maturities of the sales-type leases as of December 31, 2005 are as follows:  12 month period ending December 31,
        
        $2006
        
        168,7502007
        
        173,1332008
        
        159,5822009
        
        122,8322010
        
        90,651714,948  NOTE 4.  INVENTORIES  Inventories by major categories are summarized as follows:  December 31,
2005
$
        
        March 31,
2005
$Raw materials
        27,451
        
        23,844Work in progress
        41,501
        
        8,540Finished goods
        574,121
        
        61,620643,073
        
        94,004  NOTE 5.  EQUIPMENT, NET  Equipment, net consists of the following:  December 31,
2005
$
        
        March 31,
2005
$Testing equipment
        83,109
        
        83,109Office equipment
        82,321
        
        70,510Furniture and fixtures
        40,436
        
        39,600Leasehold improvements
        30,104
        
        14,291Motor vehicles
        35,206
        
        14,690Energy savers
        359,609
        
        359,609Total
        630,785
        
        581,809Less: Accumulated depreciation
        (304,019)
        
        (249,011)Equipment, net
        326,766
        
        332,798  Equipment, net held under capital leases are summarized as follows:       - 14 -    December 31,
2005
$
        
        March 31,
2005
$Office equipment
        3,702
        
        3,702Motor vehicles
        14,690
        
        14,690Energy savers
        237,581
        
        237,581Total
        255,973
        
        255,973Less: Accumulated depreciation
        (70,833)
        
        (49,852)Equipment, net held under capital leases
        185,140
        
        206,121  Equipment, net leased under operating leases to customers is summarized as follows:  December 31,
2005
$
        
        March 31,
2005
$Energy savers
        18,953
        
        18,953Less: Accumulated depreciation
        (8,371)
        
        (6,949)Equipment, net leased under operating leases to customers
        10,582
        
        12,004  NOTE 6.  INTANGIBLE ASSETS  Acquired intangible assets consist of the following:  December 31,
2005
$
        
        March 31,
2005
$Trademark
        1,404,113
        
        1,404,113Customer lists and relationships
        2,468,123
        
        2,468,123Unfulfilled purchase orders
        4,113
        
        4,113Total
        3,876,349
        
        3,876,349Less: Accumulated amortization
- customer lists and relationships
- unfulfilled purchase orders
        (493,624)
(4,113)
        
        (123,406)
(2,467)Total
        3,378,612
        
        3,750,476  Amortization expenses charged to net income from operations for the three months and nine months ended December 31, 2005 and 2004 were $123,406 (2004: $Nil) and $371,864 (2004:$Nil), respectively.  Anticipated amortization expense on intangible assets for each of the next five years is as follows:  12 month period ending March 31,
        
        $2006
        
        123,4062007
        
        493,6252008
        
        493,6252009
        
        493,6252010
        
        370,2181,974,499  NOTE 7.  SHORT-TERM BANK BORROWINGS  The Company's short-term borrowings consist of the following:      - 15 -    December 31,
2005
$
        
        March 31,
2005
$Bank loans
        
        938,303
        
        938,303Bank overdrafts
        
        330,326
        
        384,7831,268,629
        
        1,323,086Bank credit facilities
        
        1,459,833
        
        1,571,993Utilized
        
        (1,276,020)
        
        (1,442,636)Bank credit facilities available
        
        183,813
        
        129,357  Interest rates are generally based on the bank's best lending rate plus certain percentage and the credit lines are normally subject to periodic review.  In accordance with certain bank covenants, Tech Team Holdings Limited ("TTHL") needs to maintain a net worth of not less than $1,092,545 from July 2003 onwards and to release the existing floating charge on all assets of Tech Team Development Limited; however, these financial covenants have not been fulfilled by TTHL.  Other than the aforesaid requirements, there are no other significant covenants or other financial restrictions relating to the Companys short-term borrowings and long-term debts that the Company did not comply with.  NOTE 8.  INCOME TAX  The components of net income / (loss) before income tax and minority interests are as follows:  Three months ended December 31,
        Nine months ended December 31,2005
$
        
        2004
$
        
        2005
$
        
        2004
$Hong Kong
        (278,330)
        
        14,985
        
        (585,036)
        
        (289,965)Mainland, the PRC
        (9,026)
        
        (65,005)
        
        (99,119)
        
        (87,676)(287,356)
        
        (50,020)
        
        (684,155)
        
        (377,641)  Taxes laws applicable to the Company are as follows:  -
        Tech Team is a tax-exempted company incorporated in the Cayman Islands. -
        Under the current BVI law, TTILs income is not subject to taxation. -
        Global Systems Innovative Inc. and Tomi Fuji Energy Pte. Limited also had no assessable profits earned during the periods presented. -
        No provision for PRC income tax has been made as Tech Team Development (Zhuhai) Limited ("TTZ") had no assessable profits earned during the nine months ended December 31, 2005 and nine months ended December 31, 2004.  Preferential tax treatment has been agreed with the relevant tax authorities and TTZ is exempted from PRC income tax in the first two profitable years and is subject to half of the standard statutory tax rate of 15% in the subsequent three years.  Income tax expense for the nine months ended December 31, 2005 represents the provision for current income tax of the subsidiaries operating in Hong Kong and has been calculated at 17.5% of the estimated assessable profit for the period.  No provision for Hong Kong Profits Tax has been made for the nine months ended December 31, 2004 as the subsidiaries operating in Hong Kong had no assessable profits earned during that period.  NOTE 9.  RELATED PARTY BALANCES AND TRANSACTIONS  Related Party Transactions  Tomi Fuji Corporation Limited ("TFCL"), a shareholder of the Company, paid certain expenses totalling $748,639 on behalf of the Company and the Company repaid $886,138 during the nine months ended December 31, 2005.      - 16 -   The Company received advances from a shareholder for its operating expenses, amounting to $25,853 during the nine months ended December 31, 2005.  A director of the Company advanced loans of $3,212,339 to the Company, which included the payment by the director of the deposit for the acquisition of Beijing Illumination (Hong Kong) Limited of $1,928,020 (see Note 12) and two directors paid operating expenses of $19,239 on behalf of the Company for the nine months ended December 31, 2005. The loans are non-interest bearing and payable on demand. In addition, the Company repaid to a director $1,173,662 for the nine months ended December 31, 2005.  As of December 31, 2005, net investment in sales-type leases amounting to approximately $548,568 was collateralized for credit facilities granted to a shareholder of the Company.  Related Party Balances  The amounts due from/to related companies, directors and shareholders represent cash advances to or from them and are unsecured, non-interest bearing and have no fixed repayment terms.  The balances related to such advances are as follows:  December 31,
2005
$
        
        March 31,
2005
$Amount due from a related companyMission Hill Golf Club (Note)
        15,501
        
        15,501Amount due from a shareholderTFCL
        75,653
        
        -Amount due to  directorsBondy Tan
        3,267,883
        
        1,210,006Others
        39
        
        -3,267,922
        
        1,210,006Amounts due to shareholdersTFCL
        -
        
        61,846Others
        64,420
        
        106,00464,420
        
        167,850 Note: A director of the Company is also the Group Chief Executive and Executive Deputy Chairman of Mission Hills Group.  NOTE 10.  SEGMENTAL AND GEOGRAPHICAL INFORMATION  The Company is engaged primarily as a developer, manufacturer and integrator of energy saving products and technologies and provision of consulting and customer training services related to such products.  In addition, the Company also acts as an agent to market gasoline products on behalf of petroleum distributing companies.  The Company believes it operates in one segment, and all financial segment information can be found in the consolidated financial statements.  Geographical Information
        Three months ended December 31,
        Nine months ended December 31,2005
$
        
        2004
$
        
        2005
$
        
        2004
$Total sales:Mainland, the PRC
        77,910
        
        -
        
        1,457,069
        
        91,362Hong Kong
        1,459,589
        
        313,304
        
        1,704,336
        
        563,652Macau
        -
        
        -
        
        -
        
        205,289Singapore
        -
        
        4,035
        
        -
        
        4,0351,537,499
        
        317,339
        
        3,161,405
        
        864,338       - 17 -    The location of the Company's long-lived assets excluding restricted investments is as follows:  December 31,
2005
$
        
        March 31,
2005
$Hong Kong
        4,127,311
        
        4,518,417Mainland, the PRC
        124,265
        
        117,3754,251,576
        
        4,635,792  NOTE 11.  SHARE CAPITAL AND WARRANTS  Share Capital  On May 17, 2005, the Company closed a private placement consisting of 153,333 units at a price of $1.50 per unit for gross proceeds of $229,999.50.  Each unit consists of one share and one share purchase warrant exercisable for a period of twelve months from the date of closing at an exercise price of $2.00.  The Company issued the securities to three non U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.  On May 26, 2005, the Company closed a private placement consisting of 20,000 units at a price of $1.50 per unit for gross proceeds of $30,000.  Each unit consists of one share and one share purchase warrant exercisable for a period of twelve months from the date of closing at an exercise price of $2.00.  The Company issued the securities to two non U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.  On May 27, 2005, the Company closed a private placement consisting of 723,060 units at a price of $1.50 per unit for gross proceeds of $1,084,590.  Each unit consists of one share and one share purchase warrant exercisable for a period of twelve months from the date of closing at an exercise price of $2.00.  The Company issued the securities to seven non U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.  For each transaction, the unit price was determined based on arms-length negotiation with the investors.  Non-Employees Warrants  As of December 31, 2005, there were outstanding warrants to purchase 896,393 shares of common stock at $2.00 per share that are exercisable within a one-year period ending May 17, 2006 through May 27, 2006.  The exercise price of the warrants may be adjusted in the event that the Company pays a stock dividend, subdivides or combines outstanding shares of common stock into a greater or lesser number of shares, any capital reorganization or of any reclassification of the capital of the Company or in the case of the consolidation, merger or amalgamation of the Company with or into any other Company.  The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Companys common stock issued to non-employees of the Company as of December 31, 2005:  Warrants Outstanding
        Warrants ExercisableNumber Outstanding
        Weighted Average Remaining Contractual Life (Years)
        Exercise Price
        Number Exercisable
        Exercise Price896,393
        0.42
        $2.00
        896,393
        $2.00  Transactions involving warrants issued to non-employees are summarized as follows:       - 18 -    Number of Shares
        Price Per Share$Outstanding at April 1, 2005
        -
        -Granted
        896,393
        2.00Cancelled or expired
        -
        -Exercised
        -
        -Outstanding at December 31, 2005
        896,393
        2.00 NOTE 12. ACQUISITION OF INTEREST IN BEIJING ILLUMINATION (HONG KONG) LIMITED AND SUBSEQUENT EVENTS Acquisition of Interest in Beijing Illumination (Hong Kong) Limited On September 27, 2005, our company entered into a Sale and Purchase Agreement with Glory Goal Investments Limited and Ko Yin.  Pursuant to the terms and conditions of the Sale and Purchase Agreement, our company agreed to purchase 325 shares, or approximately 26%, of the issued and outstanding shares of Beijing Illumination (Hong Kong) Limited from Glory Goal Investments in consideration for the payment of HK$15,000,000 and the issuance of 1,750,000 common shares by our company to Glory Goal Investments. On February 15, 2006, the parties to the Sale and Purchase Agreement entered into a Letter Agreement whereby the parties agreed to extend the completion date of the Sale and Purchase Agreement from October 5, 2005 to February 22, 2006. Contemporaneous with our entry into the Sale and Purchase Agreement, our company entered into a Deed Agreement dated September 27, 2005 with Ko Yin, Admire Fame Investments Limited, Gain Huge Investments Limited and Splendid Fortune Investments Limited.  Pursuant to the terms of the Deed Agreement, Admire Fame, Gain Huge and Splendid Fortune agreed to grant our company a call option which grants our company the right to purchase 313 shares, or approximately 25.0%, of the issued and outstanding shares of Beijing Illumination from Admire Fame, Gain Huge and Splendid Fortune and a further call option to purchase 72 shares, or approximately 5.8%, of the issued and outstanding shares of Beijing Illumination from Admire Fame.  If the call options are triggered during the exercise period, our company has agreed to issue approximately 7,200,000 and 1,656,230 common shares respectively, in accordance with the terms of
the Deed Agreement.  Alternately, our company has agreed to grant Admire Fame, Gain Huge and Splendid Fortune a put option to require our company to purchase 313 shares of Beijing Illumination from Admire Fame, Gain Huge and Splendid Fortune and a further put option to require our company to purchase 72 shares of Beijing Illumination from Admire Fame.  If the put options are triggered within the exercise period, our company has agreed to issue 7,200,000 and 1,656,230 common shares respectively in accordance with the terms and conditions of the Deed Agreement.  The options granted under the Deed Agreement will be exercisable for a period of nine months, which period commences six months after the completion date of the Sale and Purchase Agreement. On October 3, 2005, our company entered into a Letter Agreement with Glory Goal Investments, Admire Fame, Gain Huge, Splendid Fortune and Ko Yin whereby the parties agreed to amend the terms of the Sale and Purchase Agreement and the Deed Agreement.  The amendments set out in the letter agreement include various provisions intended to comply with United States securities laws in regards to the issuance of securities under the two agreements. Beijing Illumination was incorporated pursuant to the laws of Hong Kong on October 11, 2002.  Beijing Illumination is an investment holding company which is engaged in the manufacture, sale, research and development of lighting equipment.  Beijing Illumination manufactures four main categories of products including: (1) metal halide lamps; (2) high-pressure sodium lamps; (3) ultra high-pressure mercury lamps; and (4) lighting accessories.  Metal halide lamps and high-pressure sodium lamps are high-intensity discharge lamps which generally offer outstanding efficiency, reliability and versatility with the additional benefit of low energy consumption in comparison with conventional incandescent lamps.  They are operated with an ancillary ballast and starting gear and have a wide scope of applications ranging from street lighting, indoor and outdoor lighting of buildings to lighting for large structures.
Besides high-intensity discharge lamps, Beijing Illumination has expanded its product mix into ultra high-pressure mercury lamps,     - 19 -   which are classified as specialty lighting source products and are key components for modern light-weight digital crystal projectors. Due to conditions precedent to closing as set out in the Sale and Purchase Agreement and the Deed Agreement, and the risk that these conditions precedent will not be satisfied, there is no assurance that our company will complete the transactions contemplated in the Sale and Purchase Agreement and the Deed Agreement.  Item2.Managements Discussion and Analysis. FORWARD-LOOKING STATEMENTS Forward-Looking Statements This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.  These statements relate to future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", which may cause our or our industrys actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.  Our financial statements are prepared in accordance with United States generally accepted accounting principles. As used in this quarterly report and unless otherwise indicated, the terms "we", "us" and "our" refer to Global Innovative Systems Inc. and our wholly-owned subsidiaries. Company Overview We were incorporated under the laws of the State of Nevada under the name "Legacy Bodysentials Inc." on September 14, 1995.  On September 25, 1996, we changed our name to "Legacy Minerals Inc." and on May 18, 1998, we changed our name to "Global Commonwealth Inc."  On November 12, 1999, we changed our name to "Global Innovative Systems Inc."  Following the sale of Energy Medicine Developments in September 2003, our company was a development stage company whose business purpose was to identify and complete a merger or acquisition of a business or business opportunity.  Upon the acquisition of Tech Team Holdings Limited on January 13, 2005, we commenced the business of selling energy-saving products through Tech Team, our wholly-owned operating subsidiary. Acquisition of Tech Team On January 7, 2005, we entered into a share exchange agreement among our company, Tech Team, Bondy Tan and the shareholders of Tech Team as set out in the share exchange agreement.  The share exchange agreement contemplated our company acquiring all of the issued and outstanding shares of Tech Team. The closing of the transactions contemplated in the share exchange agreement and the acquisition by our company of all of the issued and outstanding ordinary stock of Tech Team was completed as of January 13, 2005.  In accordance with the closing of the share exchange agreement on January 13, 2005, we acquired all of the 354,798,533 issued and outstanding ordinary shares of Tech Team, in exchange for the issuance by our company of 13,000,000 shares of our common stock to the shareholders of Tech Team on the basis of one share of our company for every 27.29219 ordinary shares of Tech Team.  As a result of the share exchange transaction, Tech Team became a wholly-owned subsidiary of     - 20 -   our company as of January 13, 2005.  For financial statement purposes, Tech Team, the acquired entity, is regarded as the predecessor entity and our company is regarded as the successor company as of January 13, 2005. As a result of the acquisition on January 13, 2005, our company had 19,033,096 shares of common stock issued and outstanding.  As of January 13, 2005, the former shareholders of Tech Team owned 13,000,000 shares of our companys common stock, which represented approximately 68.3% of the issued and outstanding shares of our company. As the former shareholders of Tech Team held 68.3% of our shares as of the acquisition date, and because the business of Tech Team represented the only business operations of our company, the acquisition of Tech Team was deemed to be a reverse acquisition for accounting purposes.  Starting with the periodic report for the quarter in which the acquisition was consummated, our company commenced filing quarterly and annual reports based on the March 31 fiscal year end of Tech Team.  Such financial statements depict the operating results of Tech Team, including the acquisition of our company, from January 13, 2005. Business of Tech Team Following the close of the share exchange agreement, our company commenced the business of selling energy-saving products through Tech Team, our wholly-owned operating subsidiary.  Tech Team has developed a proprietary energy-saving technology which is sold under the Eco-Pro Energy Saver brand and includes five different products that utilize the Eco-Pro technology.  Additionally, Tech Team distributes 16 externally-sourced energy-saving products and provides consulting and training services for purchasers of its products. The Eco-Pro Energy Saver is a computer-controlled electronic device which regulates electric power flow and voltage.  It consists of control panels containing electrical parts in a free standing enclosure which is connected between a buildings power line (power input) and its electrical circuits (power output).  Eco-Pro Energy Saver is programmable to regulate the amount of power flowing to energy-using devices, resulting in energy conservation.  The product also acts as a buffer to eliminate negative effects of fluctuations in the power supply, such as voltage surges and sags.  The Eco-Pro Energy Saver has an on-board computer with intelligent software that provides constant self-diagnosis and control.  Tech Team manufactures the Eco-Pro Energy Saver in varying sizes and capacities, as well as specialized units to serve specific applications such as centralized air-conditioning and streetlight
illumination.  The Eco-Pro Energy Saver has a life expectancy of 30 years and Tech Team provides a 10-year manufacturers warranty on all non-consumable parts and labor. The Eco-Pro Energy Saver reduces the amount of energy a customer requires to power lighting and other electrical equipment by approximately 10-50%, depending on the specific customer and application.  This results in direct electricity cost savings for customers.  The reduced electricity usage also reduces heat damage generated by lighting and other electrical equipment.  This prolongs the operating life of the customers lighting and electrical equipment, which results in savings from capital costs and maintenance costs.  The Eco-Pro Energy Saver also acts as a buffer against distortions and disturbances in the power supply.  This stabilizes and protects customers equipment and operations against uncontrollable and potentially damaging voltage surges, lightening strikes and temporary power interruptions.  The Eco-Pro Energy Saver was also designed to interface directly with existing power lines,
electrical panels and electrical circuits, enabling the unit to be installed either new or as a retrofit without requiring modification to most customers existing components. Apart from the Eco-Pro Energy Saver products, Tech Team distributes 16 other energy-saving products.  These products are sourced from third party companies mainly in Europe and North America and sold under distributorship agreements between Tech Team and the other companies.  Each of these products is a complementary energy conservation or energy efficiency product which can be integrated with the Eco-Pro Energy Saver, thus enabling Tech Team to offer comprehensive energy management solutions to prospective clients. For a more comprehensive discussion regarding our companys products and services, please see the information provided under the heading "Current Business" included in our annual report on Form 10-KSB filed on July 18, 2005. Acquisition of Interest in Beijing Illumination (Hong Kong) Limited On September 27, 2005, our company entered into a Sale and Purchase Agreement with Glory Goal Investments Limited and Ko Yin.  Pursuant to the terms and conditions of the Sale and Purchase Agreement, our company agreed to     - 21 -   purchase 325 shares, or approximately 26%, of the issued and outstanding shares of Beijing Illumination (Hong Kong) Limited from Glory Goal Investments in consideration for the payment of HK$15,000,000 and the issuance of 1,750,000 common shares by our company to Glory Goal Investments. On February 15, 2006, the parties to the Sale and Purchase Agreement entered into a Letter Agreement whereby the parties agreed to extend the completion date of the Sale and Purchase Agreement from October 5, 2005 to February 22, 2006. Contemporaneous with our entry into the Sale and Purchase Agreement, our company entered into a Deed Agreement dated September 27, 2005 with Ko Yin, Admire Fame Investments Limited, Gain Huge Investments Limited and Splendid Fortune Investments Limited.  Pursuant to the terms of the Deed Agreement, Admire Fame, Gain Huge and Splendid Fortune agreed to grant our company a call option which grants our company the right to purchase 313 shares, or approximately 25.0%, of the issued and outstanding shares of Beijing Illumination from Admire Fame, Gain Huge and Splendid Fortune and a further call option to purchase 72 shares, or approximately 5.8%, of the issued and outstanding shares of Beijing Illumination from Admire Fame.  If the call options are triggered during the exercise period, our company has agreed to issue approximately 7,200,000 and 1,656,230 common shares respectively, in accordance with the terms of
the Deed Agreement.  Alternately, our company has agreed to grant Admire Fame, Gain Huge and Splendid Fortune a put option to require our company to purchase 313 shares of Beijing Illumination from Admire Fame, Gain Huge and Splendid Fortune and a further put option to require our company to purchase 72 shares of Beijing Illumination from Admire Fame.  If the put options are triggered within the exercise period, our company has agreed to issue 7,200,000 and 1,656,230 common shares respectively in accordance with the terms and conditions of the Deed Agreement.  The options granted under the Deed Agreement will be exercisable for a period of nine months, which period commences six months after the completion date of the Sale and Purchase Agreement. On October 3, 2005, our company entered into a Letter Agreement with Glory Goal Investments, Admire Fame, Gain Huge, Splendid Fortune and Ko Yin whereby the parties agreed to amend the terms of the Sale and Purchase Agreement and the Deed Agreement.  The amendments set out in the letter agreement include various provisions intended to comply with United States securities laws in regards to the issuance of securities under the two agreements. Beijing Illumination was incorporated pursuant to the laws of Hong Kong on October 11, 2002.  Beijing Illumination is an investment holding company which is engaged in the manufacture, sale, research and development of lighting equipment.  Beijing Illumination manufactures four main categories of products including: (1) metal halide lamps; (2) high-pressure sodium lamps; (3) ultra high-pressure mercury lamps; and (4) lighting accessories.  Metal halide lamps and high-pressure sodium lamps are high-intensity discharge lamps which generally offer outstanding efficiency, reliability and versatility with the additional benefit of low energy consumption in comparison with conventional incandescent lamps.  They are operated with an ancillary ballast and starting gear and have a wide scope of applications ranging from street lighting, indoor and outdoor lighting of buildings to lighting for large structures.
Besides high-intensity discharge lamps, Beijing Illumination has expanded its product mix into ultra high-pressure mercury lamps, which are classified as specialty lighting source products and are key components for modern light-weight digital crystal projectors. Due to conditions precedent to closing as set out in the Sale and Purchase Agreement and the Deed Agreement, and the risk that these conditions precedent will not be satisfied, there is no assurance that our company will complete the transactions contemplated in the Sale and Purchase Agreement and the Deed Agreement. Material Trends and Uncertainties Periodic changes occur in our companys industry and business that make it reasonably likely that aspects of our future operating results will be materially different from our historical operating results.  Sometimes these matters have not occurred, but their existence is sufficient to raise doubt regarding the likelihood that historical operating results are an accurate gauge of future performance.  Our company attempts to identify and describe these trends, events, and uncertainties to assist investors in assessing the likely future performance of our company.  Investors should understand that these matters typically are new, sometimes unforeseen, and often are fluid in nature.  Moreover, the matters described below are not the only issues that may result in variances between past and future performance nor are they necessarily the only material trends, events, and uncertainties that will affect our
company.  As a result, investors are encouraged to use this and other information to judge for themselves the likelihood that past performance will be indicative of future performance.      - 22 -   The trends, events, and uncertainties set out in the remainder of this section have been identified by our company as those we believe are reasonably likely to materially affect the comparison of historical operating results reported herein to either other past period results or to future operating results. Following the completion of the acquisition of Tomi Fuji Energy Management Services Consultants Limited ("Tomi Fuji EMS") in January 2005, our company has been able to derive revenues from a broader customer base and expects that additional sales contracts will be concluded in the 2006 fiscal year with a broader range of clients. Results of Operations  Three Months Ended December 31, 2005 Our companys net loss before taxes and minority interest for the three months ended December 31, 2005 was $287,356, as compared to a net loss before taxes and minority interest of $50,020 for the three months ended December 31, 2004. Revenues and Cost of Revenues Total net revenues for the three months ended December 31, 2005was $1,537,499, which represents a 384% increase over the total net revenue of $317,339 for the three months ended December 31, 2004.  The increase in net revenues was primarily attributable to the increased sales of hardware products during the three months ended December 30, 2005.  The increase in revenues reflects an expanded distribution network, an increase in marketing efforts and increased growth in demand for energy-saving products.  Management believes the increase in demand for our companys products and services is mainly attributable to the increasing cost of energy and the need for businesses to reduce costs in order to remain competitive in an increasingly competitive global business environment. Specifically, sales of hardware related to energy-saving systems for the three months ended December 31, 2005 increased to $1,510,307, an increase of $1,338,989 or 782% over the three months ended December 31, 2004.  The increase in revenues from the sale of hardware was due primarily to a sales transaction of $1,389,563 made to a third party in December 2005. Cost of revenues for the three months ended December 31, 2005 was $1,234,185, an increase of $1,188,184 as compared with cost of revenues of $46,001 for the three months ended December 31, 2004.  The increase in the cost of revenues during the three months ended December 31, 2005 was directly associated with the corresponding increase in revenues. Our company acquired certain intangible assets through the acquisition of Tomi Fuji EMS in January 2005.  These intangible assets consist of trademarks, customer lists, and unfulfilled purchase orders.  Amortization of intangible assets incurred for the three months ended December 31, 2005 was $123,406 while it was nil for the three months ended December 31, 2004. Operating Expenses Operating expenses for the three months ended December 31, 2005 were $432,451 which represents a 51% increase over the operating expenses of $286,091 for the three months ended December 31, 2004.  Selling and marketing expenses as well as general and administrative expenses constitute the major components of our company's operating expenses. Selling and marketing expenses for the three months ended December 31, 2005 decreased approximately 18% to $133,481 from $162,770 for the three months ended December 31, 2004. The decrease was mainly due to the decrease in commission expenses payable to agents for the three months ended December 31, 2005. The decrease was partially offset by an increase in the salaries of sales personnel of Tomi Fuji EMS during the three months ended December 31, 2005. General and administrative expenses increased 142% during the three months ended December 31, 2005 to $298,970 from $123,321 for the three months ended December 31, 2004.  The increase was mainly due to increased salaries, rental fees, overseas travelling expenses, legal and professional fees incurred as a result of the expansion of our companys operations, including the acquisition of Tomi Fuji EMS, during the period.  Our company anticipates that these costs will increase in the future as our companys operations continue to expand.      - 23 -   Interest expense decreased to $39,024 for the three months ended December 31, 2005 as compared to $42,086 for the three months ended December 31, 2004. The decrease reflects a reduction in interest-bearing debt which was paid down with proceeds from an interest-free loan provided by a director who is also the Chief Executive Officer of our company.  The decrease in interest expenses was partially offset by interest rate increases in Hong Kong. Results of Operations  Nine Months Ended December 31, 2005 Our companys net loss before taxes and minority interest for the nine months ended December 31, 2005 was $684,155,as compared to a net loss before taxes and minority interest of $377,641 for the nine months ended December 31, 2004. Revenues and Cost of Revenues Total net revenues for the nine months ended December 31, 2005was $3,161,405, which represents a 266% increase over the total net revenue of $864,338 for the nine months ended December 31, 2004.  The increase in net revenues was primarily attributable to the increased sales of hardware products and commission income earned during the period.  The increase in revenues reflects an expanded distribution network, an increase in marketing efforts and increased growth in demand for energy-saving products. Management believes the increase in demand for our companys products and services is mainly attributable to the increasing cost of energy and the need for businesses to reduce costs in order to remain competitive in an increasingly competitive global business environment. Specifically, sales of hardware related to energy-saving systems for the nine months ended December 31, 2005 increased to $2,307,840, an increase of $1,634,554 or 243% over the nine months ended December 31, 2004.  The increase was due primarily to a sale transaction of $1,389,563 made in December 2005.  This sale transaction represents 44% of our companys total revenue for the nine months ended December 31, 2005.  Commission and service income for the nine months ended December 31, 2005 increased significantly to $836,883 as compared with $181,837 for the nine months ended December 31, 2004. The increase was primarily attributable to a commission income of $800,000 earned from the assignment of an energy saving consultancy project by Tomi Fuji EMS to a third party. This commission income represents 25% of our companys total revenue for the nine months ended December 31, 2005. Cost of revenues for the nine months ended December 31, 2005 was $1,872,769, an increase of $1,618,963, as compared with cost of revenues of $253,806 for the nine months ended December 31, 2004.  The increase was directly associated with the corresponding increase in revenues. Our company acquired certain intangible assets through the acquisition of Tomi Fuji EMS in January 2005.  These intangible assets consist of trademarks, customer lists, and unfulfilled purchase orders.  Amortization of intangible assets incurred for the nine months ended December 31, 2005 was $371,864 while it was nil for the nine months ended December 31, 2004. Operating Expenses Operating expenses include selling, general and administrative expenses and for the nine months ended December 31, 2005 were $1,517,227, representing a 68% increase in operating expenses over that of $903,038 for the nine months ended December 31, 2004. Selling and marketing expenses for the nine months ended December 31, 2005 increased approximately 39% to $462,719 from $333,590 for the nine months ended December 31, 2004.   The increase reflects increased costs as a result of the salaries of sales personnel of Tomi Fuji EMS and increased advertising expenses associated with marketing campaigns and promotional activities during the period, and were partially offset by a decrease in commission expenses payable to agents for the nine months ended December 31, 2005. Our company intends to continue to actively promote our products in existing markets in addition to penetrating new markets in the Asia Pacific region. As a result of these efforts, our company expects selling and marketing expenses to increase in the future. General and administrative expenses increased 85% during the nine months ended December 31, 2005 to $1,054,508 from $569,448 for the nine months ended December 31, 2004.  The increase was mainly due to increased salaries, rental fees, overseas travelling expenses, legal and professional fees incurred as a result of the expansion of our companys operations during the period, including the acquisition of Tomi Fuji EMS. Our company expects these costs will increase in the future as our companys operations continue to expand.      - 24 -   Interest expense decreased to $99,831 for the nine months ended December 31, 2005 as compared to $106,041 for the nine months ended December 31, 2004.  The decrease reflects a reduction in interest-bearing debt which was paid down with proceeds from an interest-free loan provided by a director who is also the Chief Executive Officer of our company.  The decrease in interest expenses was partially offset by interest rate increases in Hong Kong. Liquidity and Capital Resources Capital Resources As of December 31, 2005, our company had a net working capital deficit of $339,946 compared with a deficit of $1,904,887 as of March 31, 2005, representing a decrease in the deficit of $1,564,941. The cash and cash equivalents of our company increased to $63,153 as at December 31, 2005 as compared to $32,694 as of March 31, 2005.  The decrease in the working capital deficit was mainly due to the cash proceeds received from the issuance of share capital and common stock warrants during the period.  Our company has used the cash proceeds for partial repayment of our short-term borrowings and the loan from our director, for the purchase of inventories, and the payment of purchase deposits. The ability of our company to meet our financial commitments is primarily dependent upon the continued extension of credit by our creditors, the continued financial support of our directors and shareholders, the continued issuance of equity to new shareholders, and our ability to achieve and maintain profitable operations. Our company has raised and received additional capital of $1,344,589 by allotting and issuing 896,393 common shares in the capital of our company at an issue price of $1.50 each by way of private placements during the nine months ended December 31, 2005. Management believes that our companys cash and cash equivalents, cash provided by operating activities, if any, and our unused credit facilities will not be sufficient to meet our working capital requirements for the next twelve months. Our company plans to raise the capital required to satisfy our immediate short-term needs and additional capital required to meet our estimated funding requirements for the next twelve months primarily through the issue of new equity securities by private placement. The issuance of additional equity securities by our company may result in a significant dilution in the equity interests of our current shareholders. There is no assurance that our company will be able to obtain further funds required for our continued working capital requirements. Cash Flow Used in Operating Activities Operating activities used cash of $956,956 for the nine months ended December 31, 2005 as compared to $966,075 for the nine months ended December 31, 2004.  The net cash used in operating activities was mainly for the paymet of inventories, prepaid expenses and other current assets. Cash Flow Used in Investing Activities Our company increased the cash used in investing activities to $65,590 during the nine months ended December 31, 2005 from $2,174 during the nine months ended December 31, 2004.  The increase in investing activities was largely due to the purchase of office equipment and furnishings used in our new offices. Cash Flow Provided by Financing Activities Financing activities provided cash of $1,053,005 for the nine months ended December 31, 2005 which represents an increase of $12,665 as compared to cash of $1,040,340 for the nine months ended December 31, 2004.  Our company received gross proceeds from the issuance of share capital and common stock warrants of $1,344,589 through private placements of 896,393 shares of our common shares to twelve shareholders for the nine months ended December 31, 2005.  Net advance from a director of $129,896 was also effected during the nine months ended December 31, 2005 while a net advance from a director of $1,650,666 was recorded in the corresponding period in 2004. Capital Expenditures As of December 31, 2005, our company did not have any material commitment for capital expenditures and management does not anticipate that our company will spend additional material amounts on capital expenditures in the near future.      - 25 -   Off-Balance Sheet Arrangements Our company has no outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts.  Our company does not engage in trading activities involving non-exchange traded contracts. Contractual Obligations Operating leases include commitments for office space of $63,370.  Our companys principal business office is located at 16/F., Hang Seng Mongkok Building, 677 Nathan Road, Mongkok, Kowloon, Hong Kong.  The 3,652 square foot office space serves at the base of our corporate, managerial, accounting, financial, administrative, sales and marketing functions.  The monthly fixed rent is $4,694, plus a monthly service charge of $1,596.  Our company also leases a facility at 1st Floor, Block B, Cui Wei Industrial Building, 668 Cui Xei Road West, Zhuhai, Guangdong, Peoples Republic of China.  Zhuhai, a Special Economic Zone, is located in Guangdong Province in southern China.  It serves as a base for research, development and assembly of the Eco-Pro Energy Saver line of products, as well as sales and marketing activity within China. The obligations of these leases are set out as follows: Obligations by PeriodContractual Obligations
        
        Total
        
        Less ThanOne Year
        
        2-3 Years
        
        4-5 Years
        
        After5 YearsOperating Leases
        $
        90,244
        $
        74,245
        $
        15,999
        
        -
        
        - Our company has entered into capital lease arrangements for leasing motor vehicles and equipment used in our operations.  The lease terms are three to five years with an interest rate of 2.75% to 4.75% per annum fixed at the lease date and are secured by the lessors charge over the leased assets.  The contractual obligations as of December 31, 2005 were: Obligations  by PeriodContractualObligations(1)
        
        Total
        
        Less ThanOne Year
        
        2-3 Years
        
        4-5 Years
        
        After5 YearsCapital Lease Obligations
        $
        11,648
        $
        9,674
        $
        1,481
        $
        493
        $
        -Operating Leases
        
        -
        
        -
        
        -
        
        -
        
        -Purchase Obligations
        
        -
        
        -
        
        -
        
        -
        
        -Total Contractual Obligations
        $
        11,648
        $
        9,674
        $
        1,481
        $
        493
        $
        -  (1)
        Other than as disclosed in the off-balance sheet arrangements section, set out above, there have been no material changes to the contractual obligations of our company subsequent to December 31, 2005.  Risk Factors Much of the information included in this quarterly report includes or is based upon estimates, projections or other "forward looking statements".  Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations.  While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Such estimates, projections or other "forward looking statements" involve various risks and uncertainties as outlined below.  We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates,     - 26 -   projections or other "forward looking statements".  Prospective investors should consider carefully the risk factors set out below. Risks Related to Our Business We will require additional financing, the availability of which cannot be assured, and if our company is unable to obtain such financing, our business may fail. Our business plan calls for expenses necessary to continue the development of our products and expand our position in the market.  However, there is no assurance that actual cash requirements will not exceed our estimates.  We may need to raise additional funds to: - support our planned rapid growth; - develop new or enhanced services and technologies; - increase our marketing efforts; - acquire complementary businesses or technologies; and/or - respond to competitive pressures or unanticipated requirements. We have not yet achieved sustainable positive cash flows.  As such, we will depend to a large extent on outside capital over the near-term to fund our capital needs.  Such outside capital may be obtained from additional debt or equity financing.  We do not currently have any arrangement for financing and there is no assurance that capital will be available to meet our continuing development costs or, if the capital is available, that it will be on terms acceptable to us.  The issuance of additional equity securities by us would result in a dilution in the equity interests of our current stockholders.  Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.  If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to implement our business and growth strategies, respond to changing business
or economic conditions, withstand adverse operating results, consummate desired acquisitions or compete effectively. We operate in a highly-competitive industry and our failure to compete effectively may adversely affect our ability to generate revenue. Management is aware of similar products which compete directly with our products and some of the companies developing these similar products have greater financial, technical and marketing resources, larger distribution networks, and generate greater revenue and have greater name recognition than us.  These companies may develop products superior to those of our company.  Such competition will potentially affect our chances of achieving profitability in the future. This may place us at a disadvantage in responding to our competitors pricing strategies, technological advances, marketing campaigns, global expansion, alliances and other initiatives.  Some of our competitors conduct more extensive promotional activities and offer lower prices to customers than we do, which could allow them to gain greater market share or prevent us from increasing our market share.  In the future, we may need to decrease our prices if our competitors continue to lower their prices.  Our competitors may be able to respond more quickly to new or changing opportunities, technologies and customer requirements.  Further, to the extent our competitors are able to attract and retain customers based on the convenience of one-stop shopping or because of international operations or arrangements, our business and ability to grow could be adversely affected in a material manner.  To be
successful, we must establish and strengthen our brand awareness, effectively differentiate our product line from those of our competitors and build our international partnerships.  To achieve this we may have to substantially increase marketing and research and development in order to compete effectively.      - 27 -   Rapid technological changes in our industry could render our products non-competitive or obsolete and consequently affect our ability to generate revenues. Currently, we derive substantially all of our revenues from the sale of electrical energy-saving products.  The electrical energy-saving industry is characterised by rapid technological change, new products and services, new sales channels, evolving industry standards and changing client preferences.  Our success will depend, in part, upon our ability to make timely and cost-effective enhancements and additions to our technology and to introduce new products and services that meet customer demands.  We expect new products and services to be developed and introduced by other companies that compete with our products and services.  The proliferation of new electrical energy-saving technology may reduce demand for our Eco-Pro Energy Saver brand.  There can be no assurance that we will be successful in responding to these or other technological changes, to evolving industry standards or to new products and
services offered by our current and future competitors.  In addition, we may not have access to sufficient capital for our research and development needs in order to develop new products and services. We could lose our competitive advantages if we are not able to protect our proprietary technology and intellectual property rights against infringement, and any related litigation could be time-consuming and costly. Our success and ability to compete depends in part on our proprietary technology incorporated in our products.  If any of our competitors copy or otherwise gain access to our proprietary technology or develop similar technologies independently, we would not be able to compete as effectively.  We consider our registered trademark invaluable to our ability to continue to develop and maintain the goodwill and recognition associated with our brand.  The measures we take to protect the proprietary technology, and other intellectual property rights, which presently are based upon a combination of trademark and trade secret laws, may not be adequate to prevent their unauthorized use.  Further, the laws of foreign countries may provide inadequate protection of such intellectual property rights.  We may need to bring legal claims to enforce or protect such intellectual property rights.  Any litigation, whether
successful or unsuccessful, could result in substantial costs and a diversion of corporate resources.  In addition, notwithstanding any rights we have secured to our intellectual property, other persons may bring claims against us claiming that we have infringed on their intellectual property rights, including claims that our intellectual property rights are not valid.  Any claims against us, with or without merit, could be time-consuming and costly to defend or litigate, divert our attention and resources, result in the loss of goodwill associated with our trademarks or require us to make changes to our technologies. We hold no patents on our products and may not be able to protect our proprietary technology. Although we have not obtained patent protection for any of our products, we have sought to protect our proprietary technology through a combination of trademark and trade secret laws and other forms of intellectual property protection.  We have filed patent applications in China, Hong Kong and the United States and have patents pending for the Eco-Pro Energy Saver product as an "energy saving device".  There is no assurance that these patents will be granted. We own trademark registrations for the name and logo for "Eco-Pro" in China, Hong Kong, Macau, Thailand and the European Community.  There can be no assurance that our operations do not or will not violate the intellectual property rights of others, that they would be upheld if challenged or that we, would, in such an event, not be prevented from using such companys intellectual property rights, any of which could have a material adverse effect on our business, financial condition and results of operations. In addition, our failure to obtain licenses required from third parties for other technology and intellectual property could delay or prevent the development, manufacture or sale of our products.  Although we rely, in part, on contractual provisions to protect our trade secrets and proprietary know-how, there is no assurance that these agreements will not be breached, that we would have adequate remedies for any breach or that our trade secrets will not otherwise become known or be independently developed by competitors.  Although no lawsuits against us regarding infringement of any existing patents or other intellectual property rights are pending, nor have any claims been asserted, there can be no assurance that such infringement claims will not be asserted by third parties in the future.  There also can be no assurance in the event of such claims of infringement that we will be able to obtain licenses on
reasonable terms. Our involvement in any intellectual property dispute or action to protect trade secrets and know-how, including actions brought by us, could result in a material adverse effect on our business.  Adverse determinations in litigation in which we may become involved could subject us to liabilities to third parties, require us to grant licenses to or seek licenses     - 28 -   from third parties and prevent us from manufacturing and selling our products.  Any of these situations could have a material adverse effect on our business, financial condition and results of operations. We may not be able to hire and retain qualified personnel to support our growth and if we are unable to retain or hire such personnel in the future, our ability to improve our products and implement our business objectives could be adversely effected. To continue our growth, we will need to recruit additional senior management personnel, including persons with financial and sales experience.  In addition, we must hire, train and retain a number of other skilled personnel, including persons with experience in engineering and energy management consulting.  We have encountered competition for these personnel.  We may not be able to find or retain qualified personnel, which would have a material adverse impact on our business. Our growth could be impaired if we are not able to develop and maintain the relationships we need to implement our international strategy. Our growth will depend, in large part, on the success of our international strategy.  We have limited experience in marketing and selling our products outside of Hong Kong, China and Macau.  We will depend on partnerships and/or joint ventures in international markets to help us build our international operations and sales.  We depend upon each of our international partners to provide marketing and relationship building expertise, and a base of existing customers.  If we are unable to develop and maintain these relationships, or to develop additional relationships in other countries, our ability to penetrate, and successfully compete in foreign markets would be materially adversely affected.  To fully implement our international strategy, we will need to expand our current relationships with international partners.  These partners may not agree to expand these relationships.  Our company is subject to supply channel risk due to a concentration of supply lines with a limited number of vendors and any significant interruption from these vendors may have a material adverse effect on our company.  Our company currently relies on several vendors.  If any of these vendors terminates its relationship with our company or if our companys supply from a vendor is interrupted or terminated for any reason, we may not have sufficient time to replace the supply of products from the remaining vendors.  Any such interruption would negatively impact our ability to sell and distribute our products. Our growth could be impaired if we do not successfully handle certain risks associated with international business. There are risks inherent in doing business in international markets, including: - fluctuations in currency exchange rates; - difficulties in staffing and managing foreign operations; - changes in regulatory requirements, tariffs and other trade barriers; - potentially adverse tax consequences; and - inadequate protection for intellectual property rights. One or more of these factors may make it difficult for us to fully implement our international business strategies and may have a material adverse effect on our current or future international operations. Any changes in the political and economic policies of, or any new regulations implemented by, the Chinese government could affect, or even restrict, the operation of our business and our ability to generate revenues. Our business is currently focused on the sale of electrical energy-saving products in China.  Accordingly, our business, results of operations and financial conditions are affected to a significant degree by any economic, political and legal developments in China.      - 29 -   Since the late 1970s, the Chinese government has been reforming its economic system.  Although we believe that economic reform and the macroeconomic measures adopted by the Chinese government have had and will continue to have a positive effect on the economic development in China, there can be no assurance that the economic reform strategy will not from time to time be modified or revised.  Some modifications or revisions, if any, could have a material adverse effect on the overall economic growth of China and the development of electrical energy-saving products in China.  Any such changes would have a material adverse effect on our business.  Furthermore, there is no guarantee that the Chinese government will not impose other economic or regulatory controls that would have a material adverse effect on our business.  Any changes in the political, economic and social conditions in China, adjustments in
policies by the Chinese government or changes in laws and regulations on the sale of electrical energy-saving products could affect the manner in which we operate our business and restrict or prohibit transactions initiated or conducted by our company.  Any such changes or new regulations could affect our ability to develop and sell our products and therefore affect our ability to generate revenues. Chinas current and future economic, political and social conditions, as well as government policies could have an adverse effect on our companys overall financial condition and ability to generate revenues and profits. We expect that a substantial portion of our business, assets and operations of our company will be located and conducted in China.  The economy of China differs from the economies of most developed countries in many respects, including: - government involvement; - level of development; - growth rate; - control of foreign exchange; and - allocation of resources. While Chinas economy has experienced significant growth in the past twenty years, growth has been uneven, both geographically and among various sectors of the economy.  The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources.  Some of these measures benefit the overall economy of China, but may also have a negative effect on us.  For example, our operating results and financial condition may be adversely affected by government control over capital investments or changes in tax regulations applicable to us.  If there are any changes in any policies by the Chinese government and our business is negatively affected as a result, then our financial results, including our ability to generate revenues and profits, will also be negatively affected.  Our company is subject to foreign exchange rate risk, particularly fluctuations in the exchange rate between Chinese Renminbi and United States dollars.  Our company may enter sales transaction denominated in Chinese Renminbi ("RMB").  The Peoples Republic of China State Administration for Foreign Exchange, under the authority of the Peoples Bank of China, controls the conversion of RMB into foreign currencies.  The principal regulation governing foreign currency exchange in China is the Foreign Currency Administration Rules (1996), as amended.  Under the Rules, once various procedural requirements are met, RMB is convertible for current account transactions, including trade and services, but not for capital account transactions, including direct investment, loan or investment in securities outside China, unless the prior approval of the State Administration of Foreign Exchange of the People's Republic of China is obtained.  Although the Chinese government regulations now allow greater convertibility of RMB for current account transactions,
significant restrictions still remain.  The value of the RMB is subject to changes in Chinas central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market.  Since 1994, the conversion of RMB into foreign currencies, including United States dollars, has been based on rates set by the Peoples Bank of China, which are set daily based on the previous days interbank foreign exchange market rates and current exchange rates on the world financial markets. Since 1994, the official exchange rate generally has been stable,     - 30 -   but the Chinese government recently announced that it will no longer peg its currency exclusively to the United States dollar but will switch to a managed floating exchange rate based on market supply and demand with reference to a basket of currencies yet to be named by the Peoples Bank of China, which will likely increase the volatility of RMB as compared to United States dollars.  Our company has experienced minimal foreign exchange gains and losses to date due to the relative stability of the RMB.  We do not know what affect, if any, the decoupling of the RMB from the United States dollar will have on our financial statements and results of operations.  We do not currently engage in hedging activities to reduce our exposure to exchange rate fluctuation. Our companys success largely relies on the ability of our agents and distributors to sell our products, and on our ability to effectively monitor the activities of such persons and the failure to establish and maintain productivity from our agents and distributors may have a material adverse effect on our operations. Our company relies on agents and distributors to earn revenue by means of selling our products directly to end users with installation (Direct Sales Contracts) and through distributors (Trading Contracts), with a majority of revenues generated by the latter.  The current over-dependence on external distributors requires an effective and efficient monitoring system to ensure our success in delivering products to customers.  Our company monitors the activities of our agents and distributors but there can be no assurance that our monitoring efforts are successful in achieving a productive and efficient distribution network.  Failure to establish and maintain high levels of productivity and efficiency from our distribution network may have a material adverse effect on our operations. The future success of our company is largely dependent upon our ability to obtain or generate sufficient cash flow and the failure to obtain sustainable levels of cash flow will have a material adverse effect on our operating results. Our company generally extends a 120-day credit period to customers within our hardware sales trading contracts.  For direct sales contracts with installation, our company offers financing terms of up to 60 months to new customers.  Our company, however, is required to pay our vendors for the cost of supplies and hardware in accordance with credit terms ranging from cash on delivery to payment within 30 days.  Such financing arrangements create a time lag between the payment for inventory and the collection of revenue from sales contracts, which has placed working capital restraints on our company.  Our company has established relationships with several financial institutions to provide financing options directly to our customers for the purchase of our equipment which may assist in alleviating these working capital restraints on our company.  There can be no assurance, however, that any financial institutions
will agree to provide such a financing option, and if our company is unable to arrange such financing options for our customers, the working capital restraints on our company would be expected to continue, which could have a material adverse effect on the financial condition and operations of our company. New or changing government policies or regulations related to the energy savings industry in our markets may have an adverse effect on our operations and may further require our company to modify our business plan. Our management oversees trends in the industry by accessing available market information, including updated governmental policies and regulations related to the energy savings industry from time to time.  Both short and long-term changes in governmental policies or regulations affecting the energy savings industry may trigger our company to take appropriate measures to re-position our company to achieve our business plan or alter the business plan as a whole.  We cannot assure that our company will be able to adapt to changing policies and regulations efficiently in order to maintain the currently anticipated level of business, results of operations or financial condition. Risks Related to Our Industry A drop in the retail price of electrical energy may have a negative effect on our business. A customers decision to purchase our companys products is primarily driven by the payback on the investment resulting from the increased energy savings.  Although management believes that current retail energy prices support a reasonable return on investment for our products, there can be no assurances that future retail pricing of electrical energy will remain at such levels.      - 31 -   Risks Related to Our Common Stock A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations. A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital.  Because our operations have been primarily financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our continued operations.  Any reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and would have a negative effect on our business plans and operations, including our ability to develop new products and continue our current operations.  If the stock price declines, there can be no assurance that we can raise additional capital or generate funds from operations sufficient to meet our obligations.  We believe the following factors could cause the market price of our common stock to continue to
fluctuate widely and could cause our common stock to trade at a price below the price at which you purchase your shares: - actual or anticipated variations in our quarterly operating results, - announcements of new services, products, acquisitions or strategic relationships by us or our competitors, - trends or conditions in the energy management services industry, - changes in accounting treatments or principles, - changes in earnings estimates by securities analysts and in analyst recommendations, - changes in market valuations of other energy management services companies, and - general political, economic and market conditions. The market price for our common stock may also be affected by our ability to meet or exceed expectations of analysts or investors.  Any failure to meet these expectations, even if minor, could materially adversely affect the market price of our common stock. If we issue additional shares in the future, it will result in the dilution of our existing stockholders. Our certificate of incorporation authorizes the issuance of 800,000,000 shares of common stock and 100,000,000 shares of preferred stock.  Our board of directors has the authority to issue additional shares up to the authorized capital stated in the certificate of incorporation.  Our board of directors may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future.  The issuance of any such shares will result in a reduction of the book value or market price of the outstanding shares of our common stock.  If we do issue any such additional shares, such issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders.  Further, any such issuance may result in a change of control of our corporation. If a market for our common stock does not develop, stockholders may be unable to sell their shares. There is currently a limited market for our common stock, which trades through the Over-the-Counter Bulletin Board quotation system.  Trading of stock through the Over-the-Counter Bulletin Board is frequently thin and highly volatile.  There is no assurance that a sufficient market will develop in the stock, in which case it could be difficult for stockholders to sell their stock. Trading of our stock may be restricted by the Securities and Exchange Commissions penny stock regulations which may limit a stockholders ability to buy and sell our stock. The Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions.  Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited     - 32 -   investors".  The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse.  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission which provides information about penny stocks and the nature and level of risks in the penny stock market.  The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customers account.  The bid and offer quotations, and
the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customers confirmation.  In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchasers written agreement to the transaction.  These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules.  Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities.  We believe that the penny stock rules discourage investor interest in and limit the marketability of, our common stock. The National Association of Securities Dealers Inc., or NASD, has adopted sales practice requirements, which may limit a stockholders ability to buy and sell our shares. In addition to the "penny stock" rules described above, the NASD has adopted rules requiring that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.  Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customers financial status, tax status, investment objectives and other information.  Under interpretations of these rules, the NASD believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers.  The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit our shareholders ability to buy and sell our stock and which may have an adverse
effect on the market for our shares. Most of our assets and all of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers. Although we are organized under the laws of the State of Nevada, our principal executive office is located in Hong Kong.  Outside the United States, it may be difficult for investors to enforce judgments against us obtained in the United States in any such actions, including actions predicated upon civil liability provisions of federal securities laws.  In addition, all of our officers and directors reside outside the United States, and nearly all of the assets of these persons and our assets are located outside of the United States.  As a result, it may not be possible for investors to effect service of process within the United States upon such persons or to enforce against us or such persons judgments predicated upon the liability provisions of the United States securities laws.  There is substantial doubt as to the enforceability against us or any of our directors and officers located outside the United
States in original actions or in actions of enforcement of judgments of United States courts or liabilities predicated on the civil liability provisions of United States federal securities laws. Item3.Controls and Procedures. As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this quarterly report, being December 31, 2005, we have carried out an evaluation of the effectiveness of the design and operation of our companys disclosure controls and procedures.  This evaluation was carried out under the supervision and with the participation of our companys management, including our companys Chief Executive Officer.  Based upon that evaluation, our companys Chief Executive Officer concluded that our companys disclosure controls and procedures are effective as at the end of the period covered by this report.  There have been no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting. Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed,     - 33 -   summarized and reported, within the time period specified in the Securities and Exchange Commissions rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our president and secretary as appropriate, to allow timely decisions regarding required disclosure. PART II-OTHER INFORMATION Item1.Legal Proceedings. We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation.  There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest. Item6.Exhibits Exhibits required by Item 601 of Regulation S-B Exhibit Number
        Description(2)
        Plan of Purchase, Sale, Reorganization, Arrangement, Liquidation or Succession2.1
        Share Exchange Agreement dated January 7, 2005, among Global Innovative Systems Inc., Tech Team Holdings Limited, Bondy Tan and the Selling Shareholders (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)(3)
        (i) Articles of Incorporation; and (ii) Bylaws3.1
        Charter (incorporated by reference from our Registration Statement on Form 10-SB filed on April 11, 2000).3.2
        Articles of Incorporation (incorporated by reference from our Registration Statement on Form 10-SB filed on April 11, 2000).3.3
        Bylaws (incorporated by reference from our Registration Statement on Form 10-SB filed on April 11, 2000).3.4
        Certificate of Reverse Stock Split filed with the Nevada Secretary of State on November 12, 2003 (incorporated by reference from our Current Report on Form 8-K filed on December 17, 2003).3.5
        Certificate of Amendment to Articles of Incorporation filed with the Secretary of State of Nevada on March 3, 2004 (incorporated by reference from our Quarterly Report on Form 10-QSB filed on May 15, 2004)3.6
        Certificate of Change filed with the Secretary of State of Nevada on December 23, 2004 (incorporated by reference from our Current Report on Form 8-K filed on January 6, 2005)(10)
        Material Contracts10.1
        Share Purchase Agreement, dated September 30, 2003, between Global Innovative Systems Inc., Fraser Lawrie and Robert Fletcher (incorporated by reference from our Current Report on Form 8-K filed on November 7, 2003).10.2
        Acquisition Agreement, dated January 22, 2003, between Ken Bergestad, Walter Niemi, Lloyd Olson, Fraser Lawrie, Robert M. Fletcher and Global Innovative Systems Inc. (incorporated by reference from our Annual Report on Form 10-KSB filed on December 23, 2003).10.3
        Letter of Intent, dated September 21, 2004, between Global Innovative Systems Inc. and the shareholders of Tech Team Holdings Limited (incorporated by reference from our Annual Report on Form 10-KSB filed on December 30, 2004)       - 34 -    10.4
        Amendment to Letter of Intent, dated October 20, 2004, between Global Innovative Systems Inc. and the shareholders of Tech Team Holdings Limited (incorporated by reference from our Annual Report on Form 10-KSB filed on December 30, 2004)10.5
        Sales Agreement dated March 27, 2002, between Tech Team Development Limited and Macau Jockey Club (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.6
        Sales Agreement dated September 10, 2003, between Tech Team Development Limited and Dongguan Guan Lan Golf Club Company Limited.10.7
        Sales Agreement dated March 31, 2004, between Tech Team Development Limited and K. Wah Concrete Co. Ltd. (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.8
        Assignment Agreement dated February 11, 2004, between Tech Team Development Limited and Southern Cross Technologies Limited (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.9
        Assignment Agreement dated February 11, 2004, between Grandplex Development Limited and Scnider Limited (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.10
        Management Contract between Tech Team Holdings Limited / Tech Team Development Limited and Bondy Tan (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.11
        Management Contract between Tech Team Development Limited and Victor Chang (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.12
        Management Contract between Grandplex Development Limited and Ronny Lau (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.13
        Management Contract between Tech Team Development Limited and Mandy Kee (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.14
        Management Contract between Tech Team Development Limited and Raymond Ho (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.15
        Proposal on Sales and Marketing Services to Tech Team Development Ltd. (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.16
        Sales Agreement dated February 7, 2005, between Tomi Fuji Energy Management Services Consultants Limited and Versatech Group Limited (incorporated by reference from our Quarterly Report on Form 10-QSB filed on February 14, 2005)10.17
        Subscription Agreements of the following private placements that were issued to non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in offshore transactions relying on Regulation S and/or Section 4(2) of the Securities Act of 1933 (incorporated by reference from our Annual Report on Form 10-KSB filed on July 18, 2005):Name
        Date ofAgreement
        Numberof Units
        GrossProceedsVolitans Limited
        May 17, 2005
        133,333
        $200,000Sin Mei Yan
        May 27, 2005
        200,000
        $300,000Philip Yu-Hong Wong
        May 27, 2005
        106,393
        $159,590Siu Hung Chan
        May 27, 2005
        100,000
        $150,000Ho Sum Yeung
        May 27, 2005
        100,000
        $150,000Forever Success CompanyLimited
        May 27, 2005
        100,000
        $150,000       - 35 -    Chun Hok Yeung
        May 27, 2005
        66,667
        $100,000Yin Mee Ho
        May 27, 2005
        50,000
        $75,000Each unit consists of one share and one share purchase warrant exercisable for a period of twelve months at an exercise price of $2.0010.18
        Subscription Agreements of the following private placements that were issued to non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in offshore transactions relying on Regulation S and/or Section 4(2) of the Securities Act of 1933(incorporated by reference from our Annual Report on Form 10-KSB filed on July 18, 2005):Name
        Date ofAgreement
        Numberof Units
        GrossProceedsRonald Chong
        May 17, 2005
        12,000
        $18,000Ronco FamilyHoldings Limited
        May 17, 2005
        8,000
        $12,000Allan Watt
        May 26, 2005
        10,000
        $15,000Thomas N. Bell
        May 26, 2005
        10,000
        $15,000Each unit consists of one share and one share purchase warrant exercisable for a period of twelve months at an exercise price of $2.0010.19
        Sales Agreement dated September 8, 2005, between Tomi Fuji Energy Management Services Consultants Limited and Geopower Corporation (incorporated by reference from our Quarterly Report on Form 10-QSB filed on August 22, 2005)10.20
        Addendum to Sales Agreement dated September 16, 2005, between Tomi Fuji Energy Management Services Consultants Limited and Geopower Corporation (incorporated by reference from our Quarterly Report on Form 10-QSB filed on August 22, 2005)10.21
        Assignment Agreement dated September 16, 2005, between Tomi Fuji Energy Management Services Consultants Limited and GD Inet Electric Construction Co. Ltd. (incorporated by reference from our Quarterly Report on Form 10-QSB filed on August 22, 2005)10.22
        Sale and Purchase Agreement dated September 27, 2005, between Glory Goal Investments Limited, Global Innovative Systems Inc., and Ko Yin (incorporated by reference from our Current Report on Form 8-K filed on October 3, 2005)10.23
        Option Deed dated September 27, 2005, between Admire Fame Invests Limited, Gain Huge Investments Limited, Splendid Fortune Investments Limited, Global Innovative Systems Inc. and Ko Yin (incorporated by reference from our Current Report on Form 8-K filed on October 3, 2005)10.24
        Amendment to Sale and Purchase Agreement and Option Deed dated October 3, 2005, between Glory Goal Investments Limited, Admire Fame Investments Limited, Gain Huge Investments Limited, Splendid Fortune Investments Limited, Ko Yin and Global Innovative Systems Inc. (incorporated by reference from our Current Report on Form 8-K filed on October 3, 2005)(14)
        Code of Ethics14.1
        Code of Ethics (incorporated by reference from our Annual Report on Form 10-KSB filed on December 30, 2004)(31)
        Rule 13a-14(a)/15d-14(a) Certifications31.1*
        Certification of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(32)
        Section 1350 Certifications       - 36 -    32.1*
        Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *Filed herewith  SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GLOBAL INNOVATIVE SYSTEMS INC.  By:/s/ Bondy Tan Bondy Tan President and Chief Executive Officer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) Date: February 21, 2006